Commercial Bank Atlas Mara Zambia has announced that it has signed a term sheet that will see the bank transition ownership structure to Equity Bank of East Africa.
“Further to the Cautionary Announcement issued on 9th May 2019, in which the Board of Directors of African Banking Corporation Zambia Limited (“the Board ”or “Atlas Mara” or “the Company”) informed holders of the listed notes that Atlas Mara Limited (“the Group”) has signed a binding term sheet with Equity Group Holdings Plc (“EGH PLC”) for a share swap to exchange certain banking assets which include the Company (“the Transaction”), read a statement issued by Company Secretary Sandra Malupande, by order of the Atlas Mara Board, on 8 January 2020.
The reason for this announcement to the market was because Atlas Mara following its acquisition of Banc ABC inherited listed note securities following the takeover. Listed notes (or Investment promissory notes) are securities that are promissory notes utilized by some organizations to raise capital for business purposes. These notes are issued by investors in substitute for loan and guarantee investors that they will receive a return on their investment within a specified period of time.
Equity Bank and Atlas Mara first announced the takeover in April 2019. However, there has been pressure to renegotiate the deal due to the outcome of a divergence of fortunes of Equity and the four banks it was eying, according to TheEastAfrican.co.ke.
It is for this reason that the Board saw it prudent to make a market announcement. “The Board wishes to inform holders of the listed notes, as well as other market participants that the Transaction has not yet been finalised and negotiations are still ongoing”.
Term sheets are often used as intermediary contracts before the signing of the main deal. It nonbinding agreement setting forth the basic terms and conditions under which an investment will be made.
Despite the term sheet serving as a template to develop more detailed legally binding documents for the Equity and Atlas Mara share transfer, it is clear that negotiations are taking longer than initially anticipated.
“While there is no assurance that the potential transaction will be concluded on the terms previously announced, the parties continue to be engaged in discussions, with the objective to reach mutually-acceptable terms as soon as practicable in early 2020,” Atlas Mara said in a separate statement and reported by Bloomberg on 2 January 2020.